Musk's $400M Midterm Gamble Backfires as Tesla, SpaceX Slide

Tesla and SpaceX shares both slid in premarket trading Wednesday after voters handed Republicans a bruising midterm defeat — and Elon Musk, the billionaire who bankrolled them, is feeling it on both sides of his empire. Tesla dropped more than 5%, while SpaceX fell nearly 8% before the bell, according to MarketSurge.

Musk poured more than $400 million into backing Republican candidates this cycle, including roughly $200 million in Texas alone, where Tesla and SpaceX are both headquartered. That spending didn't buy the result he wanted. Republicans lost control of both chambers of Congress.

Texas delivered the sharper sting. Democratic candidate James Talarico beat state Attorney General Ken Paxton for a Senate seat, and state representative Gina Hinojosa unseated incumbent Gov. Greg Abbott — the first time a Democrat has won statewide office in Texas since 1994.

The sweep means Musk has fewer friends in both Washington and Austin, and his companies live in some of the most heavily regulated corners of the economy: autos, spaceflight and telecom. That heightened scrutiny could slow their sweeping AI ambitions, and it could complicate the potential Tesla-SpaceX merger currently under consideration. Musk may also face investigations tied to the government audit he ran during the early days of President Donald Trump's administration under the Department of Government Efficiency.

There's more on the line in Texas. Tesla and SpaceX want to build what's slated to be the world's largest semiconductor fab, dubbed the Terafab, in Grimes County — a project that could now run into fresh reviews from newly elected state officials. Musk and Abbott had reportedly grown close, close enough that Hinojosa sued the governor's office last month to force the release of emails between the two; a judge ruled the records can stay sealed until all appeals are exhausted.

The charts look shaky too. If Tesla's premarket losses hold, it opens below its 200-day line, a stumble that follows a 7.4% rally last week. SpaceX stock is set to open under its $135 IPO list price for the first time since August, and it remains well below its key averages.